I'm Not a Raccoon! I'm the Lone Ranger!

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

U.S. Regulator Probing Crypto Exchange BitMEX Over Client Trades  [Bloomberg]

The U.S. Commodity Futures Trading Commission is investigating crypto exchange BitMEX, according to people familiar with the matter, a platform that’s become wildly popular in Asia for letting people make big bets with little money down.

BitMEX Chief Executive Officer Arthur Hayes said in an interview in January that BitMEX removes anyone who flouted company rules barring U.S. residents and nationals. However, it is possible clients masked their location by using virtual private networks to assign their computer an Internet protocol address from a BitMEX permitted country, tricking filters put in place, Hayes said.

"It's possible."

LOL. We can all chuckle and laugh about the obvious hucksters and con men in crypto-world, the obvious raccoons like Arthur Hayes.

Luckily for Arthur, I'm sure that none of these recent legal "entanglements" will keep him from making his appointed rounds on CNBC.

I mean, when you have Sam Waksal on your network to talk about fraud in the biotech world ... not as farce but as serious commentary ... well, friends, we're no longer arguing about what CNBC is actually selling, only the price.

But I want to say something about non-obvious raccoons. I want to say something about people who are not the target of an active criminal investigation or who have not gone to prison for fraud, but are hucksters nonetheless.

Anyone who tells you that you should hodl Bitcoin buy-and-hold a non-cash-flowing, non-productive thing because of "network effects" or Metcalfe's Law or the like ... that person is talking like a raccoon. I'm not saying they ARE a raccoon. Maybe they haven't thought this out and are just parroting an ur-raccoon. That's at least three mixed metaphors, but you get the drift. I'm trying to be generous here.

And to be clear, there are plenty of non-raccoon arguments for hodling Bitcoin buying-and-holding a non-cash-flowing, non-productive thing. There's an inflation argument. There's a security and privacy argument. There's a fashion argument. I'm sure there are more.

Also to be clear, it's not raccoonish to say that you should TRADE Bitcoin a non-cash-flowing, non-productive thing based on the transactional popularity of that non-cash-flowing, non-productive thing. Lots of people trade precious metals, for example. They buy and they sell based on anything they believe motivates other buyers and sellers. Good for them!

What I am saying is that there is no inherent VALUE in Bitcoin a non-cash-flowing, non-productive thing from network effects. There is no "tipping point" in the adoption rate or transaction volumes of Bitcoin a non-cash-flowing, non-productive thing beyond which it becomes "too big to shut down".

In ten-dollar words, network effects are epiphenomenon, not phenomenon, when it comes to non-cash-flowing, non-productive things. They are a shadow of a belief system, not a signal of a belief system.

What did it mean that lots of people in 17th century Amsterdam transacted in guilders and tulips? It meant that lots of people in 17th century Amsterdam transacted in guilders and tulips. That's it. There was no grand statement beyond that. There was no signal of inherent value contained in the transaction volumes of tulips. There was no more inherent value to a Semper Augustus bulb in 1636 than in 1626, even though lots more people bought and sold tulips in 1636 than in 1626.

Price drives the transaction volumes of Bitcoin non-cash-flowing, non-productive things.

Not the other way around.

There are prominent people at the intersection of Wall Street and crypto who know this to be true - who know that the Yay, network effects! narrative is complete BS when it comes to Bitcoin - but who promote the narrative anyway.

Why?

Because it's narrative that drives the price of Bitcoin non-cash-flowing, non-productive things.

Because they are raccoons.